November, 2010
Britain’s problem?
Eurosceptics in the Conservatives have wasted no time in criticising Chancellor George Osborne’s promise of direct loans to Ireland.
For example Monday’s Daily Telegraph:
Douglas Carswell, the Conservative MP for Clacton,
More Anglo Irish burdensharing
A datapoint in the burdensharing for (Irish bank) bondholders theme.
On Friday, holders of Anglo Irish subordinated debt due in 2016 voted on an amendment needed for the bailed-out bank’s discounted exchange offer.
Irish exposure, charted
Courtesy of BNP Paribas, just who is exposed to Ireland and by how much:
Something which might come in handy as conditions for this weekend’s €80-90bn bailout are eked out.
Public and private in the Ireland bailout
Irish bondholders look safe for now — in the wake of the €80-90bn Irish bailout announced over the weekend. But it might end up being a rather short reprieve.
From David Mackie at JP Morgan:
As it stands,
Bernanke hints dollar standard is flawed
Blink and you may have missed it.
But last Friday, Ben Bernanke probably made his most important speech since his ‘helicopter money’ talk almost eight years ago.
According to author and economist Richard Duncan this is the first time the Federal Reserve chairman has publicly pointed out that the international monetary system may have a structural flaw.
Further reading
Elsewhere on Monday,
- Mark-to-make believe. Again.
- Who gains from the eurozone fiasco? China.
- All this empirical financial economics — and we’re none the wiser.
- And teaching economics — the Seinfeld way.
Pink picks
Comment, analysis and other offerings from Monday’s FT,
Clive Crook: A paralysed, diminished America
This weekend’s Nato summit in Lisbon concluded a flurry of top-level international meetings that,
Snap news
Breaking pre-market news on Monday,
- Rolls Royce wins £1.8bn contract to supply Air China with 20 engines — statement.
- QinetiQ wins $1.959bn engineering contract with NASA — statement.
- Taylor Wimpey announces £100m facility agreement and £200m senior notes offering — statement.
Irish bailout request accepted [updated]
Statement released by the Eurogroup and ECOFIN Ministers on Sunday evening:
Note: the financial assistance is being financed from European Financial Stabilisation Mechanism (EFSM) and the European Financial Stability Facility (EFSF),
Bailout live
Watch Cowen and Lenihan explain why they are taking IMF/EU cash.
FTfm on AV
Some highlights from Monday’s FTfm.
ETFs price war enters Europe
A price war on fees that broke out in the US has spread to European ETFs, with German investors being offered the chance to buy ETFs commission-free
European investors stay in safe waters
Despite a 50% jump in net investment flows,
Ireland to take the cash
Here’s Brian Lenihan interview with RTE in which he says Ireland needs a IMF/EU bailout loan — but not a three figure one.
More as we have it. Special cabinet meeting later on Sunday.
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We’ll be flagging up market developments and essential reading throughout the European and US trading day.
Further further reading
Before you start your weekend,
- Inflation in the US and China: slouching eagle, surging dragon.
- The G20 communiqué (the really honest version.)
- What happens if China’s growth slows?
- Is the Fed really screwing over savers with QE?
- The California economy and political system are broken.
To rebuild an Irish banking system, part two
We’ve now well and truly progressed to the question not of when but of how much in bailout loans is needed for Ireland, so…
From a note on Friday, we’d point out the estimate of Barclays Capital’s Antonio Garcia Pascual and Pietro Ghezzi (emphasis ours):
To rebuild an Irish banking system, part one
Routing international aid through the Irish sovereign to recapitalise Irish banks — this scenario isn’t if but when; and increasingly it’s no longer when but how, and how much.
And those last two questions (how and how much) are tricky ones to answer.
Bursting bubbles
What better way to end the week than with a history lesson from Société Générale’s Dylan Grice:
Financial historians have shown that every single financial crisis since the 1870s has been preceded by rampant credit growth.
Mortgage professionals only, please
It’s been a busy week for mortgage news, but not quite one for cheer at the Council of Mortgage Lenders (CML).
Readers might remember that in its latest trends in lending data the BofE said that the value of mortgage lending for house purchases was £5.3bn in October,
(Allied) Irish banking understatement
Here it is … the one we’ve been waiting for all Friday.
The Allied Irish Banks’ interim management statement is (finally) out.
We’ll skip to the important stuff, shall we? With our highlights lowlights:
Construction wobbles
There’s something about the following graphs from the Royal Institute for Chartered Surveyors Q3 UK Construction Market Survey that is beginning to give us a worrying sense of déja-vu (click to enlarge):
Commodity ETFs: even worse than you thought
The issue of rollover and contango decay in commodity exchange traded products has received a lot of attention in the media.
Bloomberg noted, for example, how many ETF investors were caught off guard when contango hit commodity markets this year — a situation which has eaten into the value of their investments due to the premium paid to maintain a futures position indefinitely.
QE2-as-bank-bailout
QE2-as-bank-bailout continues with a Friday op-ed by Andy Kessler, a former hedge-fund manager and author of “Eat People—And Other Unapologetic Rules for Game-Changing Entrepreneurs”.
As we’ve noted before,
A Chinese real-estate supply shock
Standard Chartered’s analysts have been doing a good job of monitoring the Chinese real-estate conundrum — i.e. will prices collapse or will they just keep booming forever?
In a note issued on Thursday,
Anglo Irish bondholders blink [corrected]
So much for the bondholder resistance.
The results of Anglo Irish Bank’s first sub-debt exchange offer — the one aimed at inflicting ‘burden-sharing’ on bondholders — are out. This particular meeting is the prelude to the main 2016 noteholder meeting,
Markets Live transcript 19 Nov 2010
Markets Live chat transcript for the chat ending at 12:21 on 19 Nov 2010. Participants in this chat were: Neil Hume, FT bryce.elder NHmorning Rabble NHsorry we are late
Bernanke: it’s not me, it’s you
The People’s Bank of China sure knows how to gatecrash a party.
In an uncanny coincidence, the PBOC lifted bank reserve requirements 50bps – widely seen as a step against QE-inspired capital flows – just as Fed chairman Ben Bernanke rose to speak at the European Central Bank on,
Iron Lady did not like ironclad EMU
Eurozone hindsight, ain’t it fun?
Peter Oborne, the Telegraph’s chief political commentator, certainly thinks so. In a Thursday column Oborne makes the point that the UK’s own recession would have been much worse if the country had been locked into the monetary union — and unable to lower its interest rates or devalue its currency — as rapidly as it did.
On declining Irish deposits
At some point this morning Allied Irish Banks will finally get round to publishing its trading update. While we wait for that statement to hit the wires, Citigroup has published a report on Irish bank deposits and the extent to which the system is now reliant on funding from the eurosystem.
Sovereign euro leakage
Counterfactual currency calculations are complicated.
Kudos, then, to Jens Nordvig and Charles St-Arnaud, FX analysts at Nomura:
We estimate that the EUR risk premium linked to sovereign risk in the eurozone could account for a 12% decline in the euro since late 2008,
Dousing ‘UK optimism’
Whatever happened to UK doom and gloom eh?
Monument Securities’ Marc Ostwald is here to serve on Friday morning — with a hefty dose of good ol’ fashioned British grumpiness — and bond vigilantism.